Impact of Wage Policy on Economic Growth in Transitive Countries and New Interpretation of the Phillips Curve

Abstract

This paper considers the problem why minimal and average earnings differ dramatically in rich and new EU countries, as well as in Ukraine. Such phenomenon is usually explained by the difference among levels of labour productivity but the modern globalization processes have been doing the technology of production in many emerging economies very similar, especially in cases of the transnational companies’ influences. The practice of the Post-Socialist transitive countries also has been demonstrating such problem. While in the beginning of the reforms they were at more or less equal economic levels, very soon they were becoming a very differ by labour cost, and it led to significant differentiation of GDP per capita. For the short-term period it is difficult to explain this phenomenon by the cardinal changes in the physical labour productivity of existing productions, but it can be done taking into account the difference in the wages policy, and the innovation changing of technological structure of production. Mentioned problems have been analysed using the Phillips curve approach. The analysis shows the transitive countries which had undertaken considerable gradual increasing of labour cost and simultaneously stimulating of the innovation activities then later they have got a high dynamics of real GDP per capita.

Item Type:

MPRA Paper

Original Title:

Impact of Wage Policy on Economic Growth in Transitive Countries and New Interpretation of the Phillips Curve

English Title:

Impact of Wage Policy on Economic Growth in Transitive Countries and New Interpretation of the Phillips Curve